Influences of Macroeconomic Activity on Virgin Atlantic Airlines

This report discusses the impact of macroeconomic factors such as unemployment rates and inflation on Virgin Atlantic Airlines, the influence of the UK's current growth rate on the company, government intervention methods that affect the enterprise, and global challenges faced by the company with recommendations to overcome them.

Influences of
Macroeconomic Activity

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1. Explaining two of macro-economic factors which the company is required to consider
together with influences the factors could have on outputs of the establishment.......................1
2. How will current growth rate of UK impact the company......................................................4
3. How can government existing intervention methods affect the enterprise..............................5
4. What are existing global challenges that the company is facing and some recommendations
to overcome them in existing time...............................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Extrinsic variables and influences that are outside of an organization's control and have a
negative impact on a company operation are referred to as the business environment.
Macroeconomic activity represents amount of activity, number of transactions, total value of
those transactions and total value of commodities produced or made in a given economy.
Decision making of businesses are related to what items to manufacture, pricing strategies,
recruitment number, compensation or salary or wages to people, expansion and so on based on
their economic expectations. Virgin Group is a very well multinational capital corporation in the
United Kingdom. Virgin Atlantic Airlines is a unit of Virgin Group, a British airline centered in
Crawley, UK. The company strives to provide passengers with the finest possible flying
experience (Virgin Atlantic Airlines, 2022). The corporation hopes that people select it over its
competitors for its affordable airfares.
The business report covers detailed explanation of macro-economic factors that influences
business outputs and growth rate of an economy impacts on the corporation. It also discusses
how government interventional methodologies can affect the company and global challenges that
are establishment is facing along with recommendations for overcoming in current duration.
MAIN BODY
1. Explaining two of macro-economic factors which the company is required to consider together
with influences the factors could have on outputs of the establishment
A macroeconomic factor is a significant fiscal, natural, or geopolitical phenomenon that
seems to have a broad impact on the economy of an area or country (Adji and Et. Al., 2018). It
describes the events which alter a country's financial outlook. In relevance to Virgin Atlantic
Airlines, macroeconomic factors enable the creation of risk in addition reward-diversified
investment strategies. The two macroeconomic factors that strategists of Virgin Atlantic Airlines
need to consider and influences on outputs are as elucidated:
Unemployment rates: The proportion of the working population that is jobless in a specific
country is computed and expressed as unemployment rate. The factor is a good indicator of the
country's standard of living. A healthier economy is shown by a higher employment rate
contrasted to the unemployed. When the majority of residents are employed, their spending
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supports the economic growth by increasing the amount of money in circulation. During
recessions, unemployment tends to grow, but during booms, it tends to fall.
Figure 1 Annual unemployment rate in the United Kingdom from 2000 to 2026. 2022
(Source: Annual unemployment rate in the United Kingdom from 2000 to 2026. 2022)
The above image represents that throughout the mid-2020s, unemployment is likely to
remain at this low level. The unemployment rate in the United Kingdom is predicted to drop to
4% in 2022, down from 4.5 percent in the year 2021 (Annual unemployment rate in the United
Kingdom from 2000 to 2026, 2022). The unemployment rate, a common barometer of an
economy's relative health, has been steadily declining in the United Kingdom since peaking at
8.1 percent in 2011. The 5.6 percent unemployment rate forecasted in this forecast indicates that
the UK job market is looking up. For Virgin Atlantic Airlines, it causes a company to have to cut
jobs in order to align production with demand. This has a direct impact on the corporation, as the
cost of state and federal unemployment insurance will rise as a result of the layoffs.
A higher unemployment rate signifies that a greater number of households are experiencing
financial hardship. While a single individual has little impact on society, high unemployment
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rates in some places can lead to higher poverty rates and worse neighbourhoods, amplifying the
societal impact of unemployment. The demand for goods and services decreases when the
economy slows. As a result, employers are looking to lay off workers. Workers who have been
laid off do not have enough money to buy necessities, which cuts income for firms even more. In
relevance to Virgin Atlantic Airlines, the situation of higher unemployment rate has a negative
influence since they lead to reduced sales as people or consumers spend less. Virgin Atlantic
Airlines has been severely harmed as a result of a major drop in clients and customers. People all
around the country are struggling to afford essential products as a result of the Covid-19
outbreak. In essence, they are avoiding travel and leisure activities, which has a negative
influence on the company's airlines sales, resulting in lower output.
Inflation: Inflation is a macroeconomic factor used to indicate an increase in the average
cost of goods or services over time (Antoneac and Iordan, 2021). Rapid inflation is a sign of
economic instability or a downturn, whereas moderate inflation is usually considered a normal
economic element. Consumers' purchasing power erodes as inflation rises, means they can now
buy less products and services than they could previously. This means that enterprises will have
decreased sales, lowering their total revenue.
Figure 2 United Kingdom Inflation Rate. 2022
(Source: United Kingdom Inflation Rate. 2022)
In accordance to above statistics, it is determined that in April 2022, the UK's annual
inflation rate surged to 9%, the highest level since 1982, owing to rising costs for a variety of
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goods and services, in yet another indicator that consumers' living standards are being squeezed
(United Kingdom Inflation Rate. 2022). Consumers' purchasing power erodes as inflation rises;
in plain terms, they can now buy less products and services than they could previously. This
means that enterprises will have decreased sales, lowering their total revenue.
Inflation in the United Kingdom encourages businesses to raise their prices quickly. Virgin
Atlantic Airline, for example, fails to pass on high production costs to its customers. As a
consequence, the element has a high potential for causing conflict between the firm and its
customers. Customers likely switch to other firms that offer identical benefits at lower rates as a
result of an entity's rising product prices. This has a negative impact on Virgin Atlantic Airline '
output because rising flight prices, rising travel charges, and many more have culminated in a
loss of customers and clients, enabling the venture to lose money on a constant basis due to a
decrease in customer purchases of items or services.
2. How will current growth rate of UK impact the company
The percentage variation of all products and services produced in a country over a given
time period when compared to a previous period is known as the economic growth rate. It is a
metric for comparing the health of an economy across time. Hotten (2022) reveal that the UK
economy grew by 7.5 percent in 2021, despite a drop in December owing to Omicron limitations.
It was the fastest rate of growth since 1941, despite a stunning 9.4% drop in 2020 when the
epidemic drove portions of the economy to shut. In a company, for instance, Virgin Atlantic
Airline, high economic growth boosts company profits, allowing them to invest more on research
and development. Furthermore, long-term economic growth boosts confidence and encourages
businesses to take chances and innovate. Mentioned below are some ways in which current
growth of UK impacts practices of Virgin Atlantic Airline:
GDP: GDP is a metric often used assess a nation's economic success. In 2021, the United
Kingdom's gross domestic output reached slightly under 2.2 trillion British pounds, a rise of
around 152.3 billion pounds over the previous year, when the UK economy was 2.04 trillion
pounds (Clark, 2022). GDP allows policymakers as well as central banks to determine whether
the economy is contracting or expanding and take appropriate action as soon as possible. In
association to Virgin Atlantic Airline, rising GDP enables policymakers to assess the influence
of factors such as monetary and fiscal policy, economic shocks, and tax and expenditure plans.
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GDP highlights the fact that a company can use it to forecast whether their sector will
thrive or falter. In case with Virgin Atlantic Airline, when the GDP shrinks, businesses managers
decide to start putting money aside as a reserve, which result in layoffs and cost-cutting
measures. However, if the economy is prospering, the company decide to expand. They might,
for example, hire new personnel, raise salaries, create new departments, and market more
products.
Economic life cycle: The general state of the economy as it moves through four stages in a
cyclical manner is referred to as the economic cycle. In UK, the economy is improving, and by
the end of 2022, it is predicted to be back to pre-crisis levels. In 2021, output is expected to
increase by 6.9%, before slowing to 4.7 percent in 2022 and 2.1 percent in 2023 (Kopp and
Williams, 2018). During the predicted period, consumption is the primary engine of growth.
Professionals forecast the economy's trajectory by following the cycle. Over the previous decade,
the United Kingdom has been in an expansionary phase. Furthermore, in the current
environment, the Covid-19 pandemic crisis has posed significant challenges to the UK economy.
The pandemic has thrown the UK economy into its most difficult era in centuries.
As the UK's economy grows, so does its usual upkeep, which includes turning down jobs
because it lacks the capacity to do all of the activities required. Economic expansion has an
impact on a business, such as Virgin Atlantic Airline, which is investing to keep up with demand
for airline services. Due to the current economic condition, consumers are more willing to pay
than usual in order to have labour accomplished. It provides the entity with a wide range of
chances by offering a platform on which to conduct out operations effectively.
3. How can government existing intervention methods affect the enterprise
Government intervention strategies are ways used by governments to interfere deeply in
market transaction issues or mobilise resources with the goal of controlling pricing or resolving
disputes. The UK economy has been severely impacted by the emergence of Covid-19. In this
circumstance, the government intervenes in the economy to ensure broad economic fairness as
well as other objectives which includes national unity and progress (Acosta-González,
Fernández-Rodríguez and Ganga, 2019). Some of intervention methods used by UK’s
government and their effects in context to Virgin Atlantic Airline are as follows:
Furlough Scheme: The scheme, which began in March 2020, was created to assist firms in
retaining and paying employees while their enterprises were closed. Workers on leave remain on
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the company's payroll according to the Coronavirus Jobs Retention Scheme. The government has
paid up to 80% of people's wages, up to a maximum of £2,500 per month, through this scheme
(Fassas, Papadamou and Kenourgios, 2021). This 'rescue' package was critical in keeping firms
viable and preventing an even greater increase in unemployment. However, under the ever-
changing environment of COVID-19, firms, for example, Virgin Atlantic Airline have found it
difficult to operate business as usual with a decreased workforce that impacts adversely on
continuity of operations.
Fiscal and monetary policies: The use of government spending and tax policies to impact
economic conditions, particularly macroeconomic variables such as aggregate demand,
employment, inflation, and wealth creation, is referred to as fiscal policy. At same time, control
of the amount of money in circulation in an economy, as well as the routes through which new
money is delivered, is referred to as monetary policy. To boost the economy and avoid a
recession in UK, the uses the policies for lowering taxes to encourage consumers to spend more.
To control economic activity over time, at present government uses both monetary and fiscal
policies. The objectives of both fiscal and monetary policy are to achieve or maintain full
employment, a high economic growth rate and stability in prices in addition wages (Khoja,
Chipulu and Jayasekera, 2019). It has a favourable impact on the operations of a corporation,
such as Virgin Atlantic Airlines, which increases output to fulfil demand for its services. In the
process, the organisation strives to create more job opportunities. Furthermore, the corporation
sees tremendous investment prospects in government spending. It emerges as a result of an
expansionary policy in which a large amount of money flows into the economy from government
sources and low taxation. When Virgin Atlantic Airline achieves a balance between price and
demand, it can expect to prosper in addition to growth.
4. What are existing global challenges that the company is facing and some recommendations to
overcome them in existing time
Producing and selling goods and services between/among countries is said to
an international business (Dileo and García Pereiro, 2019). For Virgin Atlantic Airline,
performing at global level, comes with its set of concerns and challenges that are as follows:
Politics and Policies: Political risk is a key concern and threat for international enterprises,
which must deal with circumstances of political instability and uncertainty. In case with Virgin
Atlantic Airline, non-business-friendly regulations and rules have a negative impact on how a
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company operates. For example, governments change the corporate tax rate, which has an impact
on profits. They also have an impact on businesses by raising the value-added tax on products or
boosting business rates. They enact new legislation, such as the National Minimum Wage, which
has an impact on profits and labour rights (Afanasyeva and Korovin, 2020).
Technology know how: Technology know-how alludes to technological advancements,
as well as advances in technological adoption and manufacturing and production techniques. The
level of acceptance and utility of technological innovation in diverse regions determines a
company's performance. Businesses get competitive advantages and remain competitive on a
global scale as technology advances. In case with Virgin Atlantic Airline, technological
difficulty is figuring out how to manage the connection between employees and AI robots, as the
latter eliminate the need for some abilities while increasing need for others.
Cultural differences: In the workplace, cultural variations include differing expectations
about personal space and physical contact. Traditions and customs are unique to each country.
For Virgin Atlantic Airline, on a global scale, commercial transactions not only cross borders,
but also cultures. Culture has a significant impact on how individuals think, interact, and act. It
also has an impact on the types of deals people conduct and how they negotiate them (Jin and
Kim, 2019).
To trade at global level, some of recommendations to managers of Virgin Atlantic Airline
to overcome the challenges in existing time are as follows:
 Finding commonalities with others: Every day, businesses come into contact with
people who hold ideas that differ from their own. When operating at a worldwide level
when political instability emerges, it is recommended to Virgin Atlantic Airline that it
must participant to look for commonalities among various points of view. Multilaterals,
as well as strong local banks and other commercial institutions, can provide long-term
financing commitments to the enterprise for dealing with political instability.
 Installing advanced technologies: Financial data, secret executive decisions, and other
proprietary information can all be protected with advanced technology, when installed
can give the business a competitive advantage. In order to deal with technology know
how, it is recommended to managers of Virgin Atlantic Airline to install advanced
technologies for smooth functioning. Technological advancements can assist the business
sector in recognising the factors that contribute to client satisfaction. Businesspeople may
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effectively grasp their clients' mindsets, allowing them to provide them with what they
want.
CONCLUSION
Macroeconomic factor aids in evaluating resources and capabilities as well as generating
ideas for increasing national income, increasing productivity, and creating job possibilities in
order to elevate monetary development. It is engaged with a wider variety of issues, such
as impact of fiscal policy, root causes of unemployment or inflation as well as how political
activities alter overall economic growth. At present, government intervention in UK encourages
competition, improves economic efficiency, and so promotes a more egalitarian or equitable
distribution of income across the country. Operating at global level brings various challenges for
the company that are political instability, cultural differences and technology know.
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REFERENCES
Books and Journals:
Acosta-González, E., Fernández-Rodríguez, F. and Ganga, H., 2019. Predicting corporate
financial failure using macroeconomic variables and accounting data. Computational
Economics. 53(1). pp.227-257.
Adji, S. S. and Et. Al., 2018. Political capacity, macroeconomic factors, and capital flows.
In Political capacity and economic behavior (pp. 127-146). Routledge.
Afanasyeva, O. and Korovin, D., 2020. The impact of reserve requirements of central banks on
macroeconomic indicators. Entrepreneurship and sustainability issues. 8(1). p.413.
Antoneac, A. and Iordan, O., 2021. Analysis of the macroeconomic factors influence on the
performance of financial markets. Journal of Financial Studies. 11(6). pp.9-23.
Dileo, I. and García Pereiro, T., 2019. Assessing the impact of individual and context factors on
the entrepreneurial process. A cross-country multilevel approach. International
Entrepreneurship and Management Journal. 15(4). pp.1393-1441.
Fassas, A., Papadamou, S. and Kenourgios, D., 2021. Evaluating survey-based forecasts of
interest rates and macroeconomic variables. Journal of Economic Studies.
Jin, T. and Kim, J., 2019. A new approach for assessing the macroeconomic growth energy
rebound effect. Applied Energy. 239. pp.192-200.
Khoja, L., Chipulu, M. and Jayasekera, R., 2019. Analysis of financial distress cross countries:
Using macroeconomic, industrial indicators and accounting data. International Review
of Financial Analysis. 66. p.101379.
Kopp, E. and Williams, P. D., 2018. A macroeconomic approach to the term premium.
International Monetary Fund.
Online:
Annual unemployment rate in the United Kingdom from 2000 to 2026. 2022. [Online]. Available
through: < https://www.statista.com/statistics/374800/unemployment-rate-forecast/>
Clark. D. 2022. Gross domestic product of the United Kingdom from 1948 to 2021. [Online].
Available through: <https://www.statista.com/statistics/281744/gdp-of-the-united-
kingdom/>
Hotten. W. 2022. UK economy rebounds with fastest growth since WW2. [Online]. Available
through: https://www.bbc.com/news/business-60344573
United Kingdom Inflation Rate. 2022. [Online]. Available through: <
https://tradingeconomics.com/united-kingdom/inflation-cpi>
Virgin Atlantic Airlines. 2022. [Online]. Available through: <https://www.virginatlantic.com/>
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